Cost components in Manufacturing

Cost components are used to break down calculated prices into components that are meaningful to the user such as user-defined cost structure of standard costs, sales prices, and valuation prices. They are also used for the following:

  • To compare estimated and actual production order costs.
  • To express production variances.

Cost component codes are defined in the Cost Components (tcmcs0148m000) session, and assigned to one of the following cost types:

  • Material Costs
  • Operation Costs
  • Surcharge on Material Costs
  • Surcharge on Operation Costs
  • General Costs
  • Not Applicable

The cost component type Not Applicable is intended for use in Project and Service.

You must link a cost component of the applicable costing type to everything in LN that is accountable for costs: materials, operations, surcharges, labor, and so on.

Cost component structure

In the cost component structure, you determine how a price is broken down. You can choose to break down the costs for every cost component in LN. You can also aggregate the costs on the three cost components defined in the Items - Costing (ticpr0107m000) session. You can use the cost component structure, to break down the price to the level of detail you want: from completely aggregated to a detailed breakdown.

To set up a cost component structure: aggregated costs

In the Items - Costing (ticpr0107m000) session you must define three aggregated cost components for an item. The aggregated cost components are associated with the following costs:

If you do not enter a chart in the Standard Cost Component Scheme field in the Items - Costing (ticpr0107m000) session, or for Assembly Control in the Assembly Line Costing Data (ticpr0115m000) session, all costs are broken down on the aggregated cost components. This means in Job Shop Control that if you report an order or a quantity as complete, and the items are received in the warehouse, the following happens:

  • All cost linked to cost components of the Material Costs type are booked on the aggregated cost component for material costs.
  • All cost linked to cost components of the Operation Costs type are booked on the aggregated cost component for operation costs.
  • All cost linked to cost components of the Surcharge on Material Costs type or the Surcharge on Operation Costs type are booked on the aggregated cost component for surcharge costs.
To set up a cost component structure: detailed costs

If you want to break down your costs in a detailed way, you must, apart from the aggregated cost components, define detailed cost components in the Standard Cost Scheme Details (ticpr0110m000) session. The detailed cost components are linked to a chart that is defined in the Cost Component Scheme (ticpr0109m000) session. If you enter the chart with associated detailed cost components in the Standard Cost Component Scheme field in the Items - Costing (ticpr0107m000) session, or for Assembly Control in the Assembly Line Costing Data (ticpr0115m000) session, all costs are broken down according to the cost component structure (chart details) that you defined for the chart. This means in Job Shop Control that if you report an order or a quantity as complete, and the items are received in the warehouse, the following happens:

  • Costs are booked to the matching cost component in the cost component structure.
  • If costs were linked to a cost component in LN that does not exist in the end item's cost component structure, the costs are collected in the end item's aggregated cost component.
Booking costs on cost components

During production of a manufactured item, all costs are booked on the cost component to which the costs are linked. These cost components can differ from the cost components in the end item's cost component structure.

  • Operation costs are booked on the cost component as defined in the Operation Rates (ticpr1150m000) session.
  • Material costs are booked on the materials' cost components. You can view the cost components in the Item Inventory - Cost Details (whwmd2517m000) session.
  • Surcharges are booked on the cost component as defined in the Item Surcharges (ticpr1110m000) session.

After production, if you report an order as complete and the items are received in the warehouse, the costs are booked on the cost components as defined in the end item's cost component structure. If the Moment of Completion Posting field in the Production Orders (tisfc0501m000) session is Quantity Completed, the costs are booked as soon as a quantity of the production order is reported completed.

Note

In Assembly Control, a chart with detailed cost components is linked to the assembly line instead of to the end item.

Example
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Explanation:

If you defined a detailed cost component SURCH_C for component item C in the Standard Cost Scheme Details (ticpr0110m000) session, and you want to report the costs that are posted to that detailed cost component SURCH_C separately for end item A, you must also define cost component SURCH_C in the chart details for end item A. If you do not define a cost component SURCH_C for item A, cost component SURCH_C will be part of item A's aggregated cost component SURCH_A. You must define the detailed cost components of an item's cost component structure in the Standard Cost Scheme Details (ticpr0110m000) session.

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